Bullish sentiment emerges for Europe January PVC price ideas

03 January 2014 17:52[Source: ICIS news]

LONDON (ICIS)--European polyvinyl chloride (PVC) sellers are bullish on price increases for January amid low profitability through the chlorvinyls chain, particularly in view of higher production costs with some buyers acknowledging upward movement is likely, market players said on Friday.

INEOS Chlorvinyls has announced its list price with effect from 1 January of €1,165/tonne ($1,596/tonne) FD (free delivered) in Europe and £1,040/tonne in the UK/Ireland. This equates to a proposed increase of €20/tonne and £15/tonne, respectively, when compared to its list prices in December.

An INEOS Chlorvinyls company source said an upward price move is necessary, driven by the need to recover lost margins amid the raw material cost increase and higher energy costs.

Other producers are looking for price hikes of €20-50/tonne in Europe, with a few stating they had not yet fully recovered the cost ratio increase in December and still needed to pass on the cost ratio rise in January.

In terms of costs, 50% of the ethylene monthly contract price movement is taking into account. The ethylene contract price went up by €30/tonne in December and by €15/tonne in January.

Buyers’ views were not yet widely forthcoming as a number of players were still on holiday. However, a few customers in the UK and northwest Europe expected some upward price movement in January, particularly in view of higher feedstock costs.

One of the buyers said it was not prepared to accept more than the feedstock related cost increase, stating that demand from the main downstream construction sector still remains in low season.

Another buyer reluctantly concedes that increases of €10-20/tonne may be likely due to increasing cost pressure over the last few months, as well as restocking activity taking place in January after the Christmas holiday period.

One customer in southern Europe said it has not yet started discussions, but it wants to push for a rollover, stating that it is a slow start to the year and January is also a shorter working month.

Discussions are expected to get under way in earnest from next week onwards, as more players return to the market.

Sources said it is generally too early to have a comprehensive view on demand for January, although there is some feeling among sources in northwest Europe that demand is likely to be better than in December as some buyers restock following some year-end destocking.

Another player noted consumption has held up reasonably well to-date supported by relatively mild winter weather. Other players, however, maintain that PVC construction demand is still likely to be seasonally subdued during January, a main winter month, although the extent of this will depend on how weather conditions pan out.

The market is fairly balanced, although one trader suggested prompt availability is balanced to tight, amid seasonally lower PVC production rates combined with some restocking activity.

European PVC contract prices in December were assessed up by €5-10/tonne in parts of Europe and by £10/tonne in the UK. In northwest Europe, prices were in the upper €900s/tonne FD Northwest Europe and €890-975/tonne FD Mediterranean and £850-875/tonne in the UK, according to ICIS.

Prices had moved up on the back of increased raw material cost pressure, but the magnitude of the increase had been limited by seasonally lower demand in December.